CRITERIA FOR “VALUE INVESTING”

OR

NORMS FOR HUNTING “VALUE” STOCKS & SHARES.

The following points to be bourn in mind while screening the entire gamut of listed Stocks & Shares. These can give superior returns in the fairly long time horizon of 3-5+ years (subject to reassessment, from time to time say, once a year)

{Not necessarily in the order of preference}

Bases on Annual Audited Accounts.

[1] Market cap is less than or equal to two-third of the net Current Assets.

[2] P/E (Price-to-earnings) ratio should be less than 15 and should also lower as compared to the sector average. Further the P/E is below its own past P/E.

[3] Current Ratio should be more than 1.34:1 preferably say1.50:1

[4] Quick Ratio should be more than 1

[5] P/B (Price-to- book) ratio should be less than 1 and should also lower compare to sector average.

[6] The gross Current Assets should be more than the net Current Assets + Long Term Debt.

[7] Consistently high dividend yield during last 5 years.

[8] Low Market – Cap to Sales as compared to peers (Sector average)

[9] PEG less than 1

[10] Debt- to- Equity ratio is less than 1 and in any case less than the sector average.

[11] Sales (net of excise & returns excluding other \ extraordinary income) rising every year – during last 3/5 years.

[12] EPS should have grown by at least 33% + during last 5 years.

[13] RoE (Returns- on- Equity) is more than the Sector average.

[14] Company should be generating sufficiently enough cash.

[15] Always look for ‘Margin of Safety’ hence buy at CMP if it is about two-third of the ‘Intrinsic Value’.

Thanks & Regards!

Prakash P. Joshi.

ppj_2001@yahoo.com